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Explaining cash usage in the Netherlands: the effect of electronic payment instruments

Author

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  • Nicole Jonker
  • Thijs Kettenis

Abstract

Since the mid-nineties, usage of the debit card by Dutch consumers has increased considerably. While accounting for three quarters of the total value of retail sales in the early nineties, in 2004 the value share of cash payments had fallen to about two quarters. If the cash to payment card ratio in 2004 had been the same as in 1990, the social costs of retail payments would have come out almost EUR 200 million higher. Consumers will have benefited from these savings through lower consumer prices and bank fees. Estimates indicate that the share of cash (in value terms) will decline further from 46% to about 20% in 2015. Changes in the payment infrastructure can yield even higher cost savings. This appears from the outcomes of fictitious scenarios in which the use of electronic means of payment is promoted by increasing the growth rate of the number of EFTPOS terminals and keeping the number of ATMs at their end-2004 level. The outcome in question is indicative of the effectiveness of any efficiency-enhancing measures that may betaken within the scope of the November 2005 Payment Covenant between banks and retailers. An increase in the number of EFTPOS terminals turns out to be especially effective.

Suggested Citation

  • Nicole Jonker & Thijs Kettenis, 2007. "Explaining cash usage in the Netherlands: the effect of electronic payment instruments," DNB Working Papers 136, Netherlands Central Bank, Research Department.
  • Handle: RePEc:dnb:dnbwpp:136
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    File URL: https://www.dnb.nl/binaries/Working%20Paper%20136-2007_tcm46-146793.pdf
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    References listed on IDEAS

    as
    1. Wilko Bolt & David Humphrey & Roland Uittenbogaard, 2005. "The Effect of Transaction Pricing on the Adoption of Electronic Payments: A Cross-Country Comparison," DNB Working Papers 071, Netherlands Central Bank, Research Department.
    2. Wilko Bolt, 2006. "Retail Payments in the Netherlands: Facts and Theory," De Economist, Springer, vol. 154(3), pages 345-372, September.
    3. Nicole Jonker, 2005. "Payment Instruments as Perceived by Consumers - a Public Survey," DNB Working Papers 053, Netherlands Central Bank, Research Department.
    4. Hyytinen, Ari & Takalo, Tuomas, 2004. "Multihoming in the market for payment media : evidence from young Finnish consumers," Research Discussion Papers 25/2004, Bank of Finland.
    5. W. Bolt, 2003. "Retail Payments in the Netherlands: some Facts and Some Theory," WO Research Memoranda (discontinued) 722, Netherlands Central Bank, Research Department.
    6. Paunonen, Heli & Jyrkönen, Hanna, 2002. "Cash usage in Finland : How much can be explained?," Research Discussion Papers 10/2002, Bank of Finland.
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    Citations

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    Cited by:

    1. John Bagnall & David Bounie & Kim P. Huynh & Anneke Kosse & Tobias Schmidt & Scott Schuh, 2016. "Consumer Cash Usage: A Cross-Country Comparison with Payment Diary Survey Data," International Journal of Central Banking, International Journal of Central Banking, vol. 12(4), pages 1-61, December.
    2. Łukasz Goczek & Bartosz Witkowski, 2015. "Determinants of non-cash payments," NBP Working Papers 196, Narodowy Bank Polski, Economic Research Department.
    3. VAN HOVE, Leo, 2007. "Central Banks and Payment Instruments: a Serious Case of Schizophrenia," MPRA Paper 5281, University Library of Munich, Germany.
    4. Bolt, Wilko & Jonker, Nicole & van Renselaar, Corry, 2010. "Incentives at the counter: An empirical analysis of surcharging card payments and payment behaviour in the Netherlands," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1738-1744, August.
    5. Cronin, David & McGuinness, Anne, 2010. "Retail Payment Practices. How They Have Evolved in Recent Times and Where They Might Be Going," Quarterly Bulletin Articles, Central Bank of Ireland, pages 56-82, April.
    6. Kosse, Anneke, 2013. "Do newspaper articles on card fraud affect debit card usage?," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5382-5391.
    7. Nicole Jonker & Mirjam Plooij & Johan Verburg, 2015. "Does a public campaign influence debit card usage? Evidence from the Netherlands," DNB Working Papers 470, Netherlands Central Bank, Research Department.
    8. Anneke Kosse & David-Jan Jansen, 2011. "Choosing how to pay: the influence of home country habits," DNB Working Papers 328, Netherlands Central Bank, Research Department.

    More about this item

    Keywords

    cash usage; retail payments; cost efficiency;

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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